Wilcox v. County Commissioners of Middlesex , 103 Mass. 544 ( 1870 )

Ames, J.

The petitioner’s complaint of the manner in which he has been taxed in the town of Medford, where he resides, is based entirely on the assumption that the income which he derives from his business as a member of the firm is derived from their “ stock in trade ” legally taxable and actually taxed in the city of Boston. On that ground, he claims that the tax upon his income is assessed in violation of that clause of the statute which provides that “ no income shall be taxed which is derived from property subject to taxation.” Gen. Sts. c. 11, § 4.

But it appears to us that the assumption on which the petitioner’s case depends is a fallacy. The income from a “ profession, trade or employment,” which is taxable under our system of laws, is an entirely different thing from the capital invested in the business, or the stock of goods in the purchase of which the whole or part of such capital may have been expended. The income meant by the statute is the income for the year, and is the result of the year’s business. It is the net result of many combined influences: the use of the capital invested; the personal labor and services of the members of the firm; the skill and ability with which they lay in, or from time to time renew, their stock; the carefulness and good judgment with which they sell and give credit; and the foresight and address with which they hold themselves prepared for the fluctuations and contingencies affecting the general commerce and business of the country. To express it in a more summary and comprehensive form, it is the creation of capital, industry, and skill. The stock of goods that happened to be in the possession of the firm on the first day of May might be, and it is perfectly fair to assume would be, in the ordinary course of business, for the most part sold out, and replaced by another stock; and in the course of the year this operation might be many times repeated. The income to which the statute refers does not mean merely the profits derived from the sale of the goods that happened to be on hand at the date of the" tax, but the profits derived from the dealings and business of the firm for the year, it would not relieve the petitioner from any part of his tax, though it should be found that the goods on hand at the date of the tax had yielded no profit whatever, and had contributed absolutely nothing towards making up the sum which be reported to the assessors as his income from that business. It certainly is among possibilities, that the business for the first part of the year may have been conducted, and the entire stock on hand on the first day of May may have been sold, at a loss; and yet that a favorable change in the markets, at a later period, may have overbalanced this loss, and made the result of the whole year a profitable one. And even if it could be said that the “ stock ” of the firm taxable in Boston is meant by the statute to include the whole amount of the capital invested in its business, yet the profits of the business depend upon many elements and are affected by many causes other than the mere use of capital. The tax which has been assessed upon the petitioner is not for an income derived from specific goods and merchandise ; but for an income derived from the business of dealing commercially in the like goods and merchandise with such a degree of skill, judgment and good fortune, that his share oí the year’s profits amounts to the sum which he returned as his income from business. We cannot doubt that this tax ia allowed and justified by the laws of the state; and we seo no reason for holding that the petitioner has been overtaxed.

Petition dismissed, with costs.